New port zone harbours big ambitions

New port zone harbours big ambitions

A would-be capitalist enclave in a socialist state, Mariel is emblematic
of change in Cuba, writes Marc Frank

Waves of foreign businessmen have washed up on Cuba's shores since the
thawing of US-Cuba diplomatic rela¬tions. They are following such
promi¬nent figures as the president of France, foreign ministers of
Japan, the Nether¬lands and Norway, the commerce secre¬tary of Spain and
the EU's foreign policy chief, Federica Mogherini.
Invariably, the delegations want to see the new Mariel port and
container ter¬minal west of Havana, and the surround¬ing Chinese-style
special development zone. The terminal is meant to lure ships from a
renovated Panama Canal, and the free-trade zone is a would-be capitalist
enclave in a staunchly socialist country.
But like waves receding from the island's beaches, the visitors have
left little in the sand. While some are look¬ing to set up shop in the
next few years, most await further evidence of a new Cuban attitude, and
that the change in US policy will lead to more progress in the
contentious relationship.
The Mariel special development zone is a metaphor for Cuba, a work in
progress whose future appears both bright and clouded by risk. The
termi¬nal, built with Brazilian credit and man¬aged by Singapore's PSA,
is poised to boom if the US embargo is lifted. It anchors the zone, with
a competitive tax and customs regime. But this vast area still lacks
basic infrastructure, develop-ment and a competitive edge in terms of
property ownership, labour policy and the legal environment.
In Mariel, as elsewhere in Cuba, inves¬tors must go through a government
hir¬ing hall for labour, ostensibly designed to protect Cubans from
capitalist labour practices. Investors pay the state in exchangeable
currency, while the work¬ers are paid in pesos.
"Our companies' business model is to have total control of their
employees," said one Japanese diplomat after a visit by 30 companies.
"They all adopted a wait-and-see attitude?'
Eighteen months after the zone opened, just six projects have been
approved, all but one involving just a few million dollars, employing
only doz¬ens of workers and authorised by the Council of Ministers. That
is in part because while the zone has a 60-day approval process, one
must first develop a joint plan with one or more ministries, which can
take months or even years.
Spanish hotel food supplier Hotelsa Alimentacion announced in April that
it would build a €6m factory at Mariel employing 50 workers. And CMA CGM
of France is set to operate a 17 hectare logistics centre on site. Both
have been active in Cuba for more than a decade.
President Castro has reduced imports, cut payrolls and subsidies, and
called on the government to get its bureaucratic and financial house in
order.
Cuba is juggling various initiatives and trying to play by established
interna¬tional rules as it seeks billions of dollars in investments. The
initiatives include: improving relations with the US; negoti¬ations to
normalise relations with the EU; restructuring debt; Mariel; tax
incentives for investors; and expansion of a private sector and market
forces.
The Communist party adopted a com¬prehensive reform plan in 2011 that
pledged to "enhance Cuba's credibility in its international economic
relations by strictly observing all the commit-ments that have been
entered into".
While companies inspect Mariel, the dignitaries leading the delegations
have held talks with Cuban leaders, where re-engagement with the global
economy and debt have been high on the agenda.
The reform plan calls for hastened rescheduling of Cuba's foreign debts
and implementation of "flexible restructur¬ing strategies for debt
repayment" soon. In recent years, Cuba has restructured its debts with
Russia, China, Japanese com¬mercial creditors and Mexico as a prel-ude
to more investment, and has made payments on time to suppliers and
credi¬tors. The Economist Intelligence Unit puts the debt at $25.8bn,
some $8bn of which represents defaulted debt.
When Francois Hollande, the French president, visited Cuba last month,
he told companies in his delegation that Havana and the Cuba Working
Group of the Paris Club of western creditor nations had reached
agreement on the amount owed from a 1980s default.
"The first phase is over," Mr Hollande said, referring to the work
needed before formal negotiations start. Cuba owes Paris Club members
about $15bn in defaulted debt, interest and service charges. France,
Japan, Spain and Italy hold much of it.
The Paris Club negotiations are expected to begin before the end of the
year and will be the first multinational attempt at restructuring in 15
years. Success would open the way to settling old commercial debt held
by the Lon¬don Club and eventually access to multi¬lateral lending
organisations if the US lifts opposition to Cuba's membership.

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